In an effort to ‘curb speculative risk taking’ the European Parliament has voted that bankers’ bonuses should be capped.
The proposal is that bonuses will not be permitted to exceed the amount of basic salary, i.e. a salary-to-bonus ratio of 1:1. However, if approved by either:
- at least 66% of shareholders owning half the shares represented;
- or of 75 % of votes if there is no quorum
the ratio may be increased to a maximum of 1:2 (i.e. twice basic salary).
In addition, at least 25 % of any bonus exceeding the 1:1 ratio must be deferred for at least five years. It is hoped that this will encourage bankers to take a long-term view.
If approved by the Council of Ministers, the new rules will apply from 1 January 2014.